Industry and Manufacturing in China

Industry and construction produced 53.1 percent of China’s gross domestic
product (GDP) in 2005. Industry (including mining, manufacturing, construction,
and power) contributed 52.9 percent of GDP in 2004 and occupied 22.5 percent
of the workforce. The manufacturing sector produced 44.1 percent of GDP in 2004
and accounted for 11.3 percent of total employment in 2002. China is the world’s
leading manufacturer of chemical fertilizers, cement, and steel.

Prior to 1978, most output was produced by state-owned enterprises. As a result
of the economic reforms that followed, there was a significant increase in production
by enterprises sponsored by local governments, especially townships and villages,
and, increasingly, by private entrepreneurs and foreign investors. By 2002 the
share in gross industrial output by state-owned and state-holding industries
had decreased to 41 percent, and the state-owned companies themselves contributed
only 16 percent of China’s industrial output.

An example of an emerging heavy industry is automobile manufacture, which
has soared during the reform period. In 1975 only 139,800 automobiles were produced
annually, but by 1985 production had reached 443,377, then jumped to nearly
1.1 million by 1992 and increased fairly evenly each year up until 2001, when
it reached 2.3 million. In 2002 production rose to nearly 3.3 million and then
jumped again the next year to 4.4 million. Domestic sales have kept pace with
production. After respectable annual increases in the mid- and late 1990s, sales
soared in the early 2000s, reaching 3 million automobiles sold in 2003. With
some governmental controls in place, sales dipped to 2.4 million sold in 2004.
Some forecasters expect sales to reach 6.9 million by 2015.

By 2010 China’s automobile production is projected to reach 9.4 million,
and the country could become the number-one automaker in the world by 2020.
So successful has China’s automotive industry been that it began exporting
car parts in 1999. China began to plan major moves into the automobile and components
export business starting in 2005. A new Honda factory in Guangzhou was being
built in 2004 solely for the export market and was expected to ship 30,000 passenger
vehicles to Europe in 2005. By 2004, 12 major foreign automotive manufacturers
had joint-venture plants in China. They produced a wide range of automobiles,
minivans, sport utility vehicles, buses, and trucks. In 2003 China exported
US$4.7 billion worth of vehicles and components, an increase of 34.4 percent
over 2002. By 2004 China had become the world’s fourth largest automotive
vehicle manufacturer.

Concomitant with automotive production and other steel-consuming industries,
China has been
rapidly increasing its steel production. Iron ore production kept pace with
steel production in the
early 1990s but was soon outpaced by imported iron ore and other metals in the
early 2000s.
Steel production, an estimated 140 million tons in 2000, was expected to reach
more than 350
million tons a year by 2010.